When It Comes to Pay, Everything in Moderation – Including Moderation

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Apr 4, 2014

Compensation professionals do a lot of moderating.

We work to moderate expectations. We work to moderate misunderstandings with incentive pay. And increasingly, we seem to be working to moderate pay itself.

Someone once told me that when animals are in a big herd, only those at the edges have a decent view of what’s really going on. Those in the middle just have to trust that everyone around them is moving at the right pace and in the right direction.

Ratcheting up mediocrity

While others often decry the fact that targeting the 50th percentile ratchets up pay, I would also argue that always targeting to 50th percentile ratchets up mediocrity.

How many times in your career have you been asked some variation of the question, “What is everyone else doing?” How many times have you said, “The survey data says we should pay this person $52,340” (or some other artificially specific number.) And how many times have you heard, “I don’t care what the data says, we are going to pay the way that works for us.

Those of you who have heard that last statement know what I’m talking about.

When has anyone’s passion been heated by moderation? When has anyone told an engaging story about how his or her day went exactly like everyone else’s day? The occasional larger-than-market raise or surprisingly big recognition reward can create memories and value that last far longer than the actual experience itself.

We can’t all be doing the same things

In executive compensation, Say on Pay is pushing more and more companies to moderate pay structures in a way designed to not offend anyone. And years of survey data have created wide swaths of companies who simply foretell their own future by following the same herd of peers.

Reliance on “best practices” and “trends” (which, in truth, are seldom either) turns many companies into different tones of the same color. While moderation is needed on a regular basis, the occasional big move from the norm is needed to keep people’s attention.

We all have a statement that says our pay programs are designed to attract, motivate and retain staff members. If we all do things the same way, how can that purpose ever be served? Sometimes you have step to the edge of the herd and take a look around.

You may find that there are some fantastic things beyond the relative safety of moderation. If you plan well and move quickly you can grab something new and be back in the herd before anyone notices you left.

This was originally published at the Compensation Café blog, where you can find a daily dose of caffeinated conversation on everything compensation.

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